December 2, 2020Page 1 Company Confidential
December 16, 2020
12th Annual Virtual CEO Summit 2020
December 2, 2020Page 2 Company Confidential
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Cautionary Statement Regarding Forward-Looking StatementsForward-Looking Statements:
Certain statements contained in this presentation may be considered forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, including statements regarding strategies to extend leadership in high-growth RF test, deliver high yield test and inspection for 5G, ADAS and xEV applications, increase contactor attachment rates and goal to double rate, and to provide analytics to optimize productivity, estimated total market CAGR, secular tailwinds driving end-market growth, estimated market segments CAGR sales growth, Semi Test target revenue growth CAGRs, 5G and RF Semi Test incremental revenue 1H’21, est. 5G device growth, Test and Inspection Handler target revenue growth CAGRs, Interface Solutions target revenue growth CAGRs, “Cohu Strategy” for each business unit, any comments on Cohu’s Q1’21 and FY2021 outlook, momentum or growth, Cohu “Target Model” and “Target Financial Model” strategies and all associated financial forecasts, est. growth, revenue split by business, free cash flows, R&D exp., cap ex, and est. margin improvements and quarterly Model estimates, Cohu’s fourth quarter 2020 sales forecasts, updated guidance, sales mix, est. of record orders, non-GAAP operating expenses, gross margin, adjusted EBITDA and effective tax rate, est. second half and full year 2020 financial results, and cash and shares outstanding, estimated minimum cash needed, potential M&A, est. op ex variability with sales and % of incremental sales falling to op income, any future Term Loan B principal reductions and goals, and any other statements that are predictive in nature and depend upon or refer to future events or conditions, and include words such as “may,” “will,” “should,” “would,” “expect,” “anticipate,” “plan,” “likely,” “believe,” “estimate,” “project,” “intend,” and other similar expressions among others. Statements that are not historical facts are forward-looking statements. Forward-looking statements are based on current beliefs and assumptions that are subject to risks and uncertainties and are not guarantees of future performance. Any third-party industry forecasts, comments or presentations are for reference only and Cohu does not adopt or affirm any such materials.
Actual results could differ materially from those contained in any forward-looking statement as a result of various factors, including, without limitation: The ongoing global COVID-19 pandemic has adversely affected, and is continuing to adversely affect, our business, financial condition and results of operations, and COVID-19 could re-surge at any time and our business could be abruptly impacted again to an even greater extent; October 2020 COVID-19 related government movement control orders reinstituted in Malaysia and actual adverse impacts that have begun to reoccur among Malaysia-based and/or other suppliers; Recently increasing COVID-19 cases in countries where Cohu’s principal facilities are located including the United States, the Philippines, Malaysia, Switzerland and Germany; Other significant risks associated with the Xcerra acquisition, integration and synergies including the failure to achieve the expected benefits of the acquisition, and mandatory ongoing impairment evaluation of goodwill and other intangibles whereby Cohu could be required to write off some or all of this goodwill and other intangibles; Continued availability of capital and financing and additional rating agency downgrade actions, and limited market access given our high debt levels; Our Credit Agreement contains various representations and negative covenants that limit our business flexibility; Changes to or replacement of LIBOR may adversely affect interest rates; Adverse investor reaction to the recently suspended cash dividend; Other risks associated with acquisitions; inventory, goodwill and other asset write-downs; Our ability to convert new products into production on a timely basis and to support product development and meet customer delivery and acceptance requirements for new products; Lost productivity, project delays and internal control risks due to ongoing employee “work from home” programs; Our reliance on third-party contract manufacturers and suppliers; Failure to obtain customer acceptance resulting in the inability to recognize revenue and accounts receivable collection problems; Market demand and adoption of our new products; Customer orders may be canceled or delayed; Design-wins may or may not result in future orders or sales; The concentration of our revenues from a limited number of customers; Intense competition in the semiconductor equipment industry; Our reliance on patents and intellectual property; Compliance with U.S. export regulations; Impacts from the Tax Cuts and Jobs Act of 2017 and ongoing tax examinations; Geopolitical issues, trade wars and Huawei/HiSilicon export restrictions (including new restrictions effective in May and August 2020); Retention of key staff; Other health epidemics or natural disasters; ERP system implementation issues particularly as Cohu recently launched a new ERP system in first quarter 2020 and plans a broader rollout in 2020; The seasonal, volatile and unpredictable nature of capital expenditures by semiconductor manufacturers particularly in light of weakened demand in 2019 followed by the COVID-19 global pandemic in 2020; and Rapid technological change.
These and other risks and uncertainties are discussed more fully in Cohu’s filings with the SEC, including the most recently filed Form 10-K and Form 10-Q, and the other filings made by Cohu with the SEC from time to time, which are available via the SEC’s website at www.sec.gov. Except as required by applicable law, Cohu does not undertake any obligation to revise or update any forward-looking statement, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.
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Driving Growth and Differentiation
Luis MüllerCEO
December 2, 2020Page 4 Company Confidential
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(1) Source: Gartner, June 2020 and Company estimates(2) Reflects actual YTD 2020 results plus the mid-point of the
Company’s Q4’20 guidance as updated on December 1, 2020(3) Non-GAAP figure; See Appendix for GAAP to Non-GAAP reconciliations,
and notes regarding use of forward-looking non-GAAP figures
Global Technology and Market Leader
…in $6.5 billion(1) Semiconductor and PCB Markets
Est. 2020 Revenue (2) Recurring Revenue Operating Income (2) (3)
21% 28,000+ 7%2017-20 Revenue CAGR (2)) Equipment Installed Base Est. Market CAGR (1)
(organic growth & acquisitions)
~$631M ~45% ~12%
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Cohu StrategyTarget Model
Revenue
$940M
Gross Margin
48%
Operating Income
23%Mid-term (3-5 years) Target Model;Gross Margin and Operating Income are Non-GAAP figures; See Appendix for notes regarding use of forward-looking non-GAAP figures
Extend leadership in high-growth RF test with scalable, precision instrumentation
Deliver high yield test and inspection for 5G, ADAS and xEV applications
Increase contactor attachment rate with differentiated test cell solutions
Provide analytics to optimize productivity
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Mobility 5G, data generation & transmission, automotive ADAS, electrification and telematics
Driving Growth in Select End-Markets
(1) Source: Gartner, June 2020(2) SAM: Serviceable Addressable Market are company estimates for 2021(3) 3-year target revenue CAGR per business segment to achieve Cohu mid-term target model
Applications
Auto ADAS & Electrification
Industrial Automation
Sensing & Power
Data Processing & Storage
Data Generation & Display
Communications & Networking
2xADAS and EV / HEV Semi content growth in autos (1)
1.5xRF content growth driven by 5G-enabled smartphones (1)
1.4xIncrease in global data (1)
Secular tailwinds driving end-market growth
(fcst. 3-year growth)
Leader in Semiconductor Test & Inspection
Semi Test Handler Contactor InspectionCohu SAM [$million] $1,100 $700 $500 $200Target Rev. CAGR 17% 12% 20% 12%
$-
$200
$400
$600
$800
$1,000
$1,200 #3 #1 #1 #2
(3)
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Accelerating time to yield and greater productivity through the test cell2% higher yield in the semiconductor test and inspection ~ pays for Capex
Delivering Customer Value
One-stop-shop for leading-edge solutions
in test & inspection
Test Cell Solutions
Test HandlerSemi Test Test Contactor
Active Thermal Control
Higher Signal Integrity
Test Analytics
Efficiency Analytics
High frequency measurement accuracy
Most responsive active thermal control
AI-powered infrared inspection
Test Cell accelerating time to peak yield
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Path for Growth and Differentiation(1)
AcceleratingProfitability
Significant operating leverage 23% operating income (2)
Accelerating time to yield and greater productivity
New product developments with 30%+ ROIC
Above-MarketRevenue Growth
~14% revenue CAGR; 2x the market
Share gain with leading edge solutions in test & inspection
Accelerating Tester and Contactor revenue growth
Disciplined Capital Allocation
Generating $160M+ annual free-cash-flow
Term loan repayment; targeting $60M+ annually
Enabling a smarter, safer, and more connected future
Creating Shareholder ValueROIC – Return on invested capital(1) All values are based on achieving Target Model(2) Non-GAAP figure; See Appendix for notes regarding use of forward-looking non-GAAP figures
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Semiconductor Test
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Focused Applications Inflection Points
o Sub-6G and mmWave 5G RF enabling higher data bandwidth, lower latency and new products
o More frequencies and bandwidths increasing test intensity
o Wi-Fi 6E and Ultra-Wideband RF growth driven by increasing network connectivity and Internet of Things (IoT)
o New Wi-Fi spectrum requires new tester capabilities
o Expanding RF standards enabling new IoT applications
o Application Processors, Flat Panel Display Drivers, Sensors and Power Management
o Increasing Structural Test insertions for advanced packages
Increasing Test Intensity Driving Growth
5G5G
Segments
Cohu SAM
$600M(1)
Target Rev. CAGR
18%
Mobility
Cohu SAM
$400M(1)
Target Rev. CAGR
13%
Automotive & Industrial
5G
(1) Company estimates
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Semi Test Strategy Accelerating Time to Yield
Value Proposition
RedDragon RF Instrument Suite
o Higher frequency and modulation bandwidth covering emerging and legacy RF standards
o Modular upgrade option for mmWave devices
o Established high volume production platform is an attractive alternative to home grown rack & stack
Air-Cooled Universal Test Platform
o Scalable from 5-slot, zero footprint test head to high test parallelism (100’s of devices)
o Platform breadth covering >35% of SoC available market is attractive to Semi customers and test subcontractors
Test Cell Solutions
o Tester-to-Contactor calibration replaces time-consuming customer design effort and solves critical time to yield mmWave challenge
(1) SoC – System-on-Chip
Maximum Parallel
Throughput
True Zero Footprint
Lowest Cost by Design
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RF Test Solutions
5G NR FR1 FEM sub-8 GHz
PAs, LNAs, Acoustic Filters, RF Switches,
Envelope Tracker
5G NR FR2 FEM 8-44 GHz
PAs, LNAs, Acoustic Filters, RF Switches,
Antenna Tuners, Beamformers
Wi-Fi 6/6E/7 7.125 GHz
FEM, PAs, LNAs, IoT, Mobile,
Infrastructure
Mixed Wireless UWB
IoT, Secure Access, Dense Venue Deployment
Radar NR C-V2X
Active Safety, Autonomous Driving, Smart Transportation
SatComm
Beamforming for Low Earth Orbit
Satellite Constellations
Raven
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Semi Test Cohu Strategy
Cohu SAM
$1,100M
Target Revenue CAGR
17%
Delivering best-in-class solutions to 5G and IoT applications in expanding $400M(1) RF test segment
Expanding capabilities of the low-cost universal test platform to address multiple markets
Solving the hardest test cell integration challenges enabling faster time to yield
(1) Company estimates
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Test Handler and Inspection
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Focused Applications Inflection Points
o ADAS semis for driver monitoring, collision warning, auto parking, autonomous driving
o xEVs(1); >50% of unit sales by 2027; 3x growth in $ content vs. ICE(2)
o Managing power dissipation to mitigate overheating and optimize yield
o Preventing arcing during high voltage testing
o WLCSP(3) driven by complex packages (2.5D – 3D tech.) to support miniaturization applications for mobile devices
o MEMS for microphone and other applications
o Identifying micro-scale defects in advanced packages, reducing over-rejection
o Multi-site precision measurement
Package Evolution Stressing Handling and Inspection
(1) Electrified vehicles: battery electric, plug-in hybrid, full hybrid and mild hybrid(2) Internal combustion engine(3) Wafer level chip scale package(4) Company estimates
5G
Segments
Cohu SAM
$300M
Target Rev. CAGR
21%
Automotive
Cohu SAM
$400M
Target Rev. CAGR
7%
Mobility & Inspection
(4)
(4)
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Value Proposition
Active Thermal Control (ATC)
o Cohu’s T-Core (ATC) dynamically compensates device overheating, minimizing yield loss
Advanced Inspection
o Cohu’s NV-Core advanced vision with infrared technology inspects below the silicon surface
o NV-Core uses deep learning algorithms to distinguish micro-cracks from cosmetic issues (scratches)
Handler Architecture
o Isolates MEMS stimulus modules from automation to deliver “quiet” environment for precision testing
Test Cell Solutions
o Handler T-Core architecture working with PROTRACE contactor to precisely monitor and control device temperature during testing
o Handler incorporating inert gas chamber with Cohu contactors ensures arc-free testing for high voltage applications
Test and Inspection Delivering Higher Yield
Fig 1: T-Core Thermal Control Limits Temperature (Tj) Rise
Fig 2: Deep learning algorithms minimize over-rejection
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Cohu Strategy
Focused on fast growing Automotive ADAS, xEV and Mobility applications
Deploying AI to accelerate growth in $200M(1) Inspection market
Improving test cell yield with differentiated thermal and interface technologies
Handler & Inspection
Cohu SAM
$900M
Target Revenue CAGR
12%
(1) Company estimates
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Interface Solutions
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Segments
Cohu SAM
$200MTarget Rev. CAGR
26%Mobility & Consumer
Cohu SAM
$100M
Target Rev. CAGR
16%
Automotive & IndustrialCohu SAM
$200MTarget Rev. CAGR
23%
Computing & Network
Focused Applications Inflection Points
o RF Mobility ramping to higher frequencies (18 GHz – 54 GHz)
o Expanding Wi-Fi spectrum and RF bands
o Increasing port counts
o Complex signal management
o xEV driving higher power, smaller packages & multisite test
o ADAS processor test requires tighter temperature control
o High power (>10 kV, 4 kA)
o Precision across temperature
o Higher test parallelism
o Safety and quality
o Cloud, AI, edge processing increasing interface speed, electro-mechanical tolerances
o Higher data rates (>50 Gbps) and pin counts (>10,000 / device)
o 2D and 3D package integration
Test Contactor Growth Opportunity
(1) Company estimates
(1)
(1)
(1)
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Test Contactors Extending Value in Key Segments
Value Proposition
High Fidelity RF o Contactor platform with direct signal path for mmWave applications up to 100 GHz
o Probe technology spanning 5G FR1 and FR2
High Performance Digital
o Coaxial solutions provide exceptional signal isolation and impedance control, scalable for large package platforms up to 60 Gbps
Precision Analog o Kelvin contact solutions that scale to high power and small footprint to enable high test site density
Intelligent and Embedded Sensors
o PROTRACE intelligent contactors closing the loop on thermal control to enable peak yield
o 5G Interceptor extending test instrumentation to mmWave and calibration to the device under test
Cohu Solutions
Cohu Test Cell value1. Faster calibration2. Improved accuracy3. Closed-loop control4. Fast learning cycles
Cohu Advantage
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mmWave (5G)PAs, LNAs, Acoustic Filters, RF
Switches, Antenna Tuners
ElectrificationPower, Battery Management,
Sensors, Wireless Control
ADASRadar, LiDAR, Vision, MCUs,
Apps Processors, C-V2X
Cloud ComputingCPU, GPU, Apps Processors
RedDragon
RF InstrumentSuite
MT9928
High Voltage Handler
MATRiX
AutomotiveTri-temp ATC(1)
Handler
Eclipse
Handler &DiamondxTester
cRacer ecoAmpxWave cBoa
Cohu Test Cell Solving Time to Yield
(1) Active Thermal Control
cStrata
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Test Contactor Cohu Strategy
Innovating conventional probe technology to address both 5G and data center markets
Leverage Cohu’s leadership position in automotive to win applications in ADAS and vehicle electrification
Deploying differentiated test cell solutions that create strong competitive barriers in high growth markets
Cohu SAM
$500M
Target Revenue CAGR
20%
December 2, 2020Page 23 Company Confidential
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Jeff JonesCFO
Delivering Profitability and Shareholder Value
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Q4’20 Update and Q1’21 Outlook
(1) Provided in the October 29, 2020 press release and earnings call(2) The Q4’20 non-GAAP guidance excludes estimated pre-tax charges related to stock-based compensation of $0.2M (CoS) and $3.1M (Opex), and amortization of
purchased intangibles of $9.6M (Opex ), and other costs as further described and reconciled, if available, in the Appendix
Q4’20Guidance (1)
Q4’20Update
Revenue $176 - $192M $195 - $200M
Gross Margin (2) 44% - 45% 45% - 46%
Operating Expenses (2) ~ $51M ~ $53M
Adjusted EBITDA (2) ~ 18%(mid-point of guidance)
~ 20%(mid-point of guidance)
Share gain in RF test and accelerating automotive demandEst. test cell utilization improved to 84% at the end of OctoberForecasting record orders in Q4’20 with automotive demand improving to 2018 levels
Updated Q4’20 revenue guidance mid-point is 31% higher than Q3’20Q1’21 revenue projected to be ~ 5% higher than updated Q4’20Reduced term loan B debt by $20.9 million quarter-to-date in Q4’20
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Strategy & Execution Yielding Results
41%
43%
41%
42%
45%
2017 2018 2019 1H20 2H20E
Gross Margin (2)
16%17%
8%9%
17%
2017 2018 2019 1H20 2H20E
Adjusted EBITDA (2)
1H $283M
2H$348M
2017 2018 2019 2020E
Revenue ($M) (1)
21% CAGR
(1)
$353M
$631M
Driving revenue growth through value-added, differentiated technologies and products focused on select end-markets
Strong operating leverage driving increased profitability(1) Reflects actual YTD 2020 results plus the mid-point of the Company’s Q4’20 guidance as updated on December 1, 2020(2) Amounts are Non-GAAP. See Appendix for GAAP to Non-GAAP reconciliations, and notes regarding use of forward-looking non-GAAP figures
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Target Financial Model
(1) Reflects actual YTD 2020 results plus the mid-point of the Company’s Q4’20 guidance as updated on December 1, 2020(2) Reflects cash from operating activities minus capital expenditures(3) Mid-term is 3 – 5 years
Except for Revenue and Free Cash Flow, “Target Financial Model” assumptions are non-GAAP forward-looking figures; See Appendix for notes regarding use of forward-looking non-GAAP figures
2020 Est.(1) Mid-term Model (3) Target Quarterly Model
Revenue $631M $940M $190M $210M $235M $250M
Gross Margin 44% 48% 46% 47% 48% 49%
Operating Expenses 32% 25% 28% 27% 25% 24%
Adjusted EBITDA 14% 24% 20% 22% 24% 25%
Non-GAAP EPS $1.05 $3.60 $0.55 $0.70 $0.90 $1.00
Free Cash Flow (2) 7% > 17% > 13% > 15% > 17% > 18%
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Capital Allocation[$Million] Q3’20
Cash and Investments $171
Total Debt $346
Net Debt / Adjusted EBITDA(1) 3.2x
Reinvest in the businessStrong organic growth opportunitiesTargeting R&D at ~ 12% of sales
Repayment of the term loan BTargeting annual repayments of ~ $60M
M&A to expand SAM and technology portfolio
Minimum cash for operations ~ $80MProduction ramps may require additional cash to fund inventory and receivables
Term Loan B ~ $328M at Q3’20Balance reduced to ~ $307M in Q4’20Covenant-lite with no minimum coverage ratios requirementMinimum quarterly payments of $875K (principal) plus ~ $3M of interest at current LIBOR + 300 bpsMaturity date is 10/1/2025
(1) For the last 12 months ending September 26, 2020; Non-GAAP figure - see Appendix for GAAP to Non-GAAP reconciliations
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$500
$600
$700
$800
$900
$1,000
2020 Est. Automotive Mobility Computing Industrial
Revenue Growth by Market Segment
Path to $940M Target
Leveraging market position and leading-edge products to drive revenue in high-growth applications including ADAS, xEV, RF test and inspectionUnique cross-selling and test cell solutions accelerate time to yield driving revenue growth and creating strong competitive barriers
$M
(1) Reflects actual YTD 2020 results plus the mid-point of the Company’s Q4’20 guidance as updated on December 1, 2020
(1)
Revenue Distribution (1)
Semi Test
Test & InspectionHandlers
Test Interface
PCB Test
Est. 2020 Revenue (1) is ~ 55% systems and ~ 45% recurringRecurring by Business: Test & Inspection Handlers 49%, Semi Test 11%, Test Interface 100%, PCB Test 34%
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Investment Thesis
$2,500MSAM
~7%Market CAGR
Leading-edgesolutions targeting select end-markets
48%Gross Margin (1)
+400 bpsScalable Asia operations
Benefiting from mixand low-cost
manufacturing centers
$940MRevenue
~14%Target Revenue CAGR
Growing 2x faster than overall
market
23%Operating Income (1)
+1,100 bpsDisciplined Opex spending
Strong >17% free cash flow;$60M+ annual debt
repayment
(1) Non-GAAP forward looking figures; See Appendix for notes regarding use of forward-looking non-GAAP figures
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Chris Bohrson, GMTest Handler & Inspection Group
Devin Sheridan, GMInterface Solutions Group
AppendixUse of Non-GAAP Financial Information:
This presentation includes non-GAAP financial measures, including non-GAAP Gross Margin/Profit, Income and Income (adjusted earnings) per share, Operating Income, Operating Expense and Adjusted EBITDA that supplement the Company’s Condensed Consolidated Statements of Operations prepared under generally accepted accounting principles (GAAP). These non-GAAP financial measures adjust the Company’s actual results prepared under GAAP to exclude charges and the related income tax effect for: share-based compensation, the amortization of purchased intangible assets including favorable/unfavorable lease adjustments, restructuring costs, manufacturing transition and severance costs, asset impairment charges, acquisition-related costs and associated professional fees, reduction of indemnification receivable, depreciation of purchase accounting adjustments to property, plant and equipment, purchase accounting inventory step-up included in cost of sales, and amortization of cloud-based software implementation costs (Adjusted EBITDA only). Reconciliations of GAAP to non-GAAP amounts for the periods presented herein are provided in this Appendix and should be considered together with the Condensed Consolidated Statements of Operations.
These non-GAAP measures are not meant as a substitute for GAAP, but are included solely for informational and comparative purposes. The Company’s management believes that this information can assist investors in evaluating the Company’s operational trends, financial performance, and cash generating capacity. Management uses non-GAAP measures for a variety of reasons, including to make operational decisions, to determine executive compensation in part, to forecast future operational results, and for comparison to our annual operating plan. However, the non-GAAP financial measures should not be regarded as a replacement for (or superior to) corresponding, similarly captioned, GAAP measures.
Use of Forward-Looking Non-GAAP Information:
This presentation includes non-GAAP forward looking figures that exclude estimated charges related to stock-based compensation, amortization of purchased intangibles, restructuring costs, acquisition-related costs, manufacturing transition/severance costs, inventory step-up costs, amortization of cloud-based software implementation costs (Adjusted EBITDA only), or other non-operational or unusual items, which we are unable predict without unreasonable efforts due to their inherent uncertainty, therefore, reconciliation of these non-GAAP forward looking figures to GAAP is not provided. Where a non-GAAP figure includes historical data and forward-looking estimates, we have reconciled the historical data, but for the foregoing reasons have not reconciled the forward-looking estimates.
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GAAP to Non-GAAP Reconciliation
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GAAP to Non-GAAP Reconciliation
Earnings ReconciliationSep 26,
2020Diluted
EPSLoss From Continuing Operations - GAAP (28,704)$ (0.68)$
Share based compensation 10,313 0.24Amortization of purchased intangible assets 28,848 0.68Manufacturing transition and severance costs 318 0.01Restructuring costs related to inventory in COS 4,281 0.10Restructuring costs 1,400 0.03PP&E step-up included in COS and SG&A 729 0.02Impairment charge 11,249 0.26Gain on sale of facility (4,495) (0.11)Tax effect of Non-GAAP adjustments (5,051) (0.12)
Income (Loss) From Continuing Operations - Non-GAAP 18,888$ 0.44$
Weighted Average Shares - GAAP Basic 41,764Weighted Average Shares - Non-GAAP Diluted 42,457
Operating Expense ReconciliationSep 26,
2020% of Net
SalesOperating Expense - GAAP 196,055$ 45.2%
Share based compensation (9,672) -2.2%Amortization of purchased intangible assets (28,848) -6.7%Manufacturing transition and severance costs (318) -0.1%Restructuring costs (1,400) -0.3%PP&E step-up included in SG&A (729) -0.2%Impairment charge (11,249) -2.6%Gain on sale of facility 4,495 1.0%
Operating Expense - Non-GAAP 148,334$ 32.1%
9 Months Ending
9 Months Ending